Lahore, May 09, 2019 (PPI-OT): VIS Credit Rating Company Limited has reaffirmed the entity ratings of Indus Dyeing and Manufacturing Co Ltd (IDMC) at ‘A+/A-1’ (Single A Plus/A-One). Long Term Rating of ‘A+’ denotes good credit quality and adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ signifies high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The previous rating action for IDMC was announced on July 31, 2018.
Assigned ratings to IDMC incorporate the company’s established track record in the spinning sector and strong financial profile. Ratings also take into account high business risk profile due to cyclical and competitive nature of the local spinning industry. However business risk profile is supported by expected elevated cotton prices, strong local demand (a number of players in the value added segment are undergoing expansions) and favorable Government policies for textile sector. Ratings remain dependent on maintaining strong financial risk profile over the rating horizon.
IDMC operates through three manufacturing facilities located in Karachi, Hyderabad and Muzaffargarh. The spinning segment operates through 178,896 spindles and has continued to operate at high capacity utilization levels. Further expansion in installed capacity is planned through addition of new spindles which are projected to be operational by June’2019. The Company also plans to diversify operations through investment in a 50MW wind power plant.
Assessment of financial profile depicts improving profitability and liquidity profile and healthy capitalization indicators. Gross margins of the company have witnessed an upward trajectory attributable largely to currency devaluation and inventory gains. Margins are expected to revert to normal levels in the absence of inventory gains and sizeable rupee depreciation. Liquidity profile of the company is considered strong with healthy cash flow coverage of outstanding long-term obligations and sufficient cushion of short term borrowings through stock in trade and trade debts. Equity base of the IDMC has increased over time on the back of internal capital generation. With limited projected increase in debt levels for expansion and investment in wind power project, leverage and gearing levels are expected to remain within manageable levels over the rating horizon.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: http://jcrvis.com.pk/